Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
DOUBLE YOUR DONATION!
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. A generous donor is matching all donations of $100 or more! So please donate now to double your punch!
FacebookTwitterGoogle+RedditEmail

The Queen Mother of Global Austerity and Financialization

We typically honor the convention to refrain from speaking ill of the recently departed. But Margaret Thatcher probably would not object to an epitaph focusing on how her political legacy was to achieve her professed aim of “irreversibly” dismantling Britain’s public sector. Attacking central planning by government, she shifted it into much more centralized financial hands – the City of London, unopposed by any economic back bench of financial regulation and “free” of meaningful anti-monopoly price regulation.

Mrs. Thatcher transformed the character of British politics by heading a democratically elected Parliamentary government that permitted financial planners to carve up the public domain with popular consent. Like her actor contemporary Ronald Reagan, she narrated an appealing cover story that promised to help the economy recover. The reality, of course, was to raise Britain’s cost of living and doing business. But this zero-sum game turned the economy’s loss into a vast windfall for the Conservative Party’s constituency in Britain’s banking sector.

By underpricing her privatization of British Telephone and subsequent vast monopolies, she made it appear that customers would be the big gainers, rather than large financial institutions. And by giving underwriters a windfall 3% commission (formerly based on floating the stock of much smaller start-up companies), Mrs. Thatcher oversaw the start of Britain’s Great Polarization between the creditor 1% and the increasingly indebted 99%.

Attacking rent-seeking in government, she opened the floodgates to economic rent-seeking in its classical sense: land rent in real estate (with debt-inflated “capital” gains) to make British property so high-priced that employees who work in London must now live outside it, taking highly expensive privatized railroads to work. Privatization also created vast new opportunities for monopoly rent for privatized public utilities, along with predatory financial takings by increasingly predatory banking.

Finance has been the mother of monopolies ever since Dutch and other foreign creditors helped England incorporate the East India Company in 1600, the Bank of England in 1694, and other commercial monopolies culminating in the South Sea Company in the 1710s.

By time Mrs. Thatcher became Prime Minister in 1979, Britain had made over a century of enormous investment in public infrastructure. Financial managers eyed this commanding height as a set of potential monopolies to be turned into cash cows to enrich high finance. Mrs. Thatcher became the cheerleader for what became the greatest giveaway of the century as the City of London’s gain became the industrial economy’s loss. Britain’s lords of finance became the equivalent of America’s great railroad land barons of the 19th century, the ruling elite to preside over today’s descent into neoliberal austerity.

Her tenure as Prime Minister seemed to reprise Peter Seller’s role in Being There. She made good television precisely because her philosophy was stitched together in a sequence of sound bites that flattened complex social and economic relationships into a banal personal psychodrama. Mrs. Thatcher’s ability to sweep the broad financial and economic polarization and financial “free lunch” behind a curtain enabled her to distract attention from the consequences of what Harold Macmillan characterized as “selling off the family silver.” It was as if the economy was a middle-class grocer’s family trying to balance its checkbook along the lines of what its banker insisted were necessary in the face of wages being squeezed by rising prices for basic needs.

The ground for Mrs. Thatcher’s rule was prepared by the fact that England’s economy was as much a mess as the rest of the world by the time she took office. The 1979 Winter of Discontent saw a perfect storm unfold. Unable to restrain Arthur Scargill and other and other labor grandstanders, the British Labour Party felt little need to wait for Britain’s share of North Sea oil to come on stream. That windfall would subsidize a decade of dismantling what was left of British industry. Oil states do not need to be efficient. They do not need industry, or even employment.

Labour Prime Minister James Callaghan made a token attempt to address these issues by requesting an IMF loan in 1976 to finance tangible industrial re-investment as bridge financing until the UK’s North Sea oil could begin generating foreign exchange. But US Treasury Secretary Bill Simon read him the riot act. IMF and U.S. policy was to provide credit only to pay bondholders, not to build up the real economy. Britain would be advanced loans only if it reoriented its economy to let high finance do the planning.

The UK became the IMF’s best neoliberal poster child, establishing a comparative advantage in offshore finance in what ultimately would flower as Gordon Brown’s notorious Light Touch that brought about the banking collapses of 2008. In this sense her role was to serve as Britain’s version of Boris Yeltsin, sponsoring the carve-up of centuries of public investment.

Mrs. Thatcher stepped into the post of Prime Minister in 1979 just as the neoliberal ploy was getting underway. The “grocer’s daughter” depicted Britain’s problems as a result of uppity labor. Her view stuck a chord as labor leaders called a series of politically self-defeating strikes that disrupted daily life and made it even more of a struggle than usual for most voters. Britain’s economy had never been riper for a divide and conquer strategy.

The new twist was that the class war aimed at labor in its role of consumer and debtor, not as employee. England’s domestic industry took one beating after another as factories closed their doors throughout the country (with the most successful becoming gentrified real estate developments).

The Iron Lady was convinced she was rebuilding England’s economy, while in reality it was only getting richer from London’s outlaw banks. Throughout the world, the damage wrought by this financialized economy has been immense. By “liberating” national money from the constraints of taxing authorities, the Middle East stopped much of its projects for industrial development. After 1990 the Soviet bloc was deindustrialized to become an oil, gas and mining economy. And for Britain, trillions of dollars in global tax revenues that could have been used for industrial and social development were routed though London, where the UK has lived off the fees from this free-for-all. So despite Mrs. Thatcher’s admiration for Milton Friedman, famous for claiming that There Is No Such Thing As A Free Lunch, she made Britain’s economy all about obtaining a free lunch – eaten by the world’s financial managers who flocked to its shores.

How much did Lady Thatcher come to understand about a financial sector of which she never deliberately favored? She never expressed regret about how her policies paved the way for New Labour to take the next giant step in empowering the City of London’s financial complex that has un-policed the banks to catalyze one financial crash after the next, hollowing out Britain’s economy in the process.

When Mrs. Thatcher took power, 1 in 7 of the England’s children lived in poverty. By the end of her reforms that number had risen to 1 in 3. She polarized the country in a ‘divide & conquer’ strategy that foreshadowed that of Ronald Reagan and more recent American politicians such as Wisconsin Governor Scott Walker. The effect of her policy was to foreclose on the economic mobility into the middle class that ironically she believed her policies were promoting.

Pundits the world over are chirping about her role in “saving” Britain, not as indebting it – destroyed an economy in order to save it. Her rule was historic mainly by posing the conundrum that has shaped neoliberal politics since 1980: How can governments nurture and endow financial kleptocrats in the context of rule by popular consent?

This can be achieved only by violating the Prime Assumption of classical liberal political philosophy: voters must be sufficiently informed to understand the consequences of their actions. This means that governments must take a long-term perspective.

But finance always has lived in the short run, and nowhere in the world is banking more short-term than in Britain. Nobody better exemplified this narrow-minded perspective than Lady Thatcher. Her simplistic rhetoric helped inspire an inordinate share of simpletons conflating supposed common sense with wisdom.

Not altogether simple, perhaps, but simply opportunistic. As the uncredited patron saint of New Labour, Mrs. Thatcher became the intellectual force inspiring her successor and emulator Tony Blair to complete the transformation of British electoral politics to mobilize popular consent to permit the financial sector to privatize and carve up Britain’s public infrastructure into a set of monopolies. In so doing, the United Kingdom’s was transformed from a real economy of production to one that scavenged the world for rents through its offshore banks. In the end, not only was great damage inflicted on England, but on the entire world as capital fled developing countries for safe harbors in London’s banks. Meanwhile, governments throughout the world today are declaring “We’re broke,” as their oligarchs grow ever more rich.

Michael Hudson’s book summarizing his economic theories, “The Bubble and Beyond,” is available on Amazon. His latest book is Finance Capitalism and Its Discontents.  He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He can be reached via his website, mh@michael-hudson.com

JEFFREY SOMMERS is an associate professor of political economy at the University of Wisconsin-Milwaukee, and is visiting faculty at the Stockholm School of Economics in Riga.  He is co-editor of the forthcoming book The Contradictions of Austerity. In addition to CounterPunch he also publishes in The Financial Times, The Guardian, TruthOut and routinely appears as an expert on global television programs.  He can be reached at: Jeffrey.sommers@fulbrightmail.org

 

October 23, 2018
Patrick Cockburn
The Middle East, Not Russia, Will Prove Trump’s Downfall
Ipek S. Burnett
The Assault on The New Colossus: Trump’s Threat to Close the U.S.-Mexican Border
Mary Troy Johnston
The War on Terror is the Reign of Terror
Maximilian Werner
The Rhetoric and Reality of Death by Grizzly
David Macaray
Teamsters, Hells Angels, and Self-Determination
Jeffrey Sommers
“No People, Big Problem”: Democracy and Its Discontents In Latvia
Dean Baker
Looking for the Next Crisis: the Not Very Scary World of CLOs
Binoy Kampmark
Leaking for Change: ASIO, Jakarta, and Australia’s Jerusalem Problem
Chris Wright
The Necessity of “Lesser-Evil” Voting
Muhammad Othman
Daunting Challenge for Activists: The Cook Customer “Connection”
Don Fitz
A Debate for Auditor: What the Papers Wouldn’t Say
October 22, 2018
Henry Giroux
Neoliberalism in the Age of Pedagogical Terrorism
Melvin Goodman
Washington’s Latest Cold War Maneuver: Pulling Out of the INF
David Mattson
Basket of Deplorables Revisited: Grizzly Bears at the Mercy of Wyoming
Michelle Renee Matisons
Hurricane War Zone Further Immiserates Florida Panhandle, Panama City
Tom Gill
A Storm is Brewing in Europe: Italy and Its Public Finances Are at the Center of It
Suyapa Portillo Villeda
An Illegitimate, US-Backed Regime is Fueling the Honduran Refugee Crisis
Christopher Brauchli
The Liars’ Bench
Gary Leupp
Will Trump Split the World by Endorsing a Bold-Faced Lie?
Michael Howard
The New York Times’ Animal Cruelty Fetish
Alice Slater
Time Out for Nukes!
Geoff Dutton
Yes, Virginia, There are Conspiracies—I Think
Daniel Warner
Davos in the Desert: To Attend or Not, That is Not the Question
Priti Gulati Cox – Stan Cox
Mothers of Exiles: For Many, the Child-Separation Ordeal May Never End
Manuel E. Yepe
Pence v. China: Cold War 2.0 May Have Just Begun
Raouf Halaby
Of Pith Helmets and Sartorial Colonialism
Dan Carey
Aspirational Goals  
Wim Laven
Intentional or Incompetence—Voter Suppression Where We Live
Weekend Edition
October 19, 2018
Friday - Sunday
Jason Hirthler
The Pieties of the Liberal Class
Jeffrey St. Clair
A Day in My Life at CounterPunch
Paul Street
“Male Energy,” Authoritarian Whiteness and Creeping Fascism in the Age of Trump
Nick Pemberton
Reflections on Chomsky’s Voting Strategy: Why The Democratic Party Can’t Be Saved
John Davis
The Last History of the United States
Yigal Bronner
The Road to Khan al-Akhmar
Robert Hunziker
The Negan Syndrome
Andrew Levine
Democrats Ahead: Progressives Beware
Rannie Amiri
There is No “Proxy War” in Yemen
David Rosen
America’s Lost Souls: the 21st Century Lumpen-Proletariat?
Joseph Natoli
The Age of Misrepresentations
Ron Jacobs
History Is Not Kind
John Laforge
White House Radiation: Weakened Regulations Would Save Industry Billions
Ramzy Baroud
The UN ‘Sheriff’: Nikki Haley Elevated Israel, Damaged US Standing
Robert Fantina
Trump, Human Rights and the Middle East
Anthony Pahnke – Jim Goodman
NAFTA 2.0 Will Help Corporations More Than Farmers
Jill Richardson
Identity Crisis: Elizabeth Warren’s Claims Cherokee Heritage
FacebookTwitterGoogle+RedditEmail